Pₓ = ₹2 and Pᵧ = ₹3. At a consumer's current purchases MUₓ = 10 and MUᵧ = 12. Is he in equilibrium?

No: Y gives more utility, so he should buy more YCorrect answerYour answerYes: both goods have positive MUCorrect answerYour answerNo: X gives 5 utils per rupee and Y gives 4, so he should buy more XCorrect answerYour answerYes: MUᵧ is greater than MUₓCorrect answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer C

Correct answer: C

MUₓ ÷ Pₓ = 10 ÷ 2 = 5; MUᵧ ÷ Pᵧ = 12 ÷ 3 = 4.
The ratios are unequal and X's is higher, so shifting spending from Y to X raises satisfaction.

Worth noting

Y's higher MU (12) is misleading because Y costs more.

Concept: Testing for two-good equilibrium
Typical timeTypical: 70 s
Your timeYours: —

The rule this testsEquilibrium with two goods

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Ten questions from Utility & Consumer's Equilibrium, at your own pace.

Pₓ = ₹2 and Pᵧ = ₹3. At a consumer's current purchases MUₓ = 10 and MUᵧ = 12. Is he in equilibrium?

Explanation